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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting: 2 December 2013

 

Joint Report of the Leader and the Cabinet Member for Housing, Building Maintenance and Community Safety

 

Housing Business Plan 2013

 

Purpose of the Report

1.         To present the Housing Business Plan 2013 to Cabinet.

Recommendations

1.         That Cabinet recommend the Housing Business Plan 2013 to Council for approval.

Reasons for the Recommendations

1.         To obtain approval for the Housing Business Plan 2013.

Background

2.         The Welsh Government (WG) requires all local authorities who retain their housing stock to submit annually an acceptable Housing Business Plan that indicates a detailed financial forecast in the form of a 30 year financial model.

3.         The Business Plan is the primary tool for a local authority’s housing landlord service and includes all assets within the Council’s Housing Revenue Account (HRA).

4.         At the time of writing, notification on the submission deadline had not been received from WG, however in previous years’ the submission date has been 31st December.  This submission will then form the basis of the Major Repairs Allowance (MRA) grant application, a pivotal financing component for the Housing Improvement Programme (to meet the Welsh Housing Quality Standard).

Relevant Issues and Options

5.         The business model incorporates the most recent investment requirements based on the 2007 Stock Condition Survey, adjusted for works carried out since that date.

6.         Average rents are £78.57 in 2013/14 calculated on a 52 week basis.  Rents are assumed to increase by inflation plus 1% from 2014/15 onwards in line with the notional rent guideline increase as per WG guidance.

7.         The Major Repairs Allowance is £2.8million per year.  No inflation has been allowed for this grant.

8.         All other Revenue income and expenditure is based on the 2013/14 revised budget plus inflation. There has also been an increase of £200,000 per annum for a proposed restructure from 2014/15 onwards. The proposed restructure is intended to strengthen the service in terms of dealing with anti-social behaviour, statutory compliance (e.g. fire risk assessment work, gas and electrical safety) asset management and rent recovery and make it fit for forthcoming challenges.

9.         To deal with the specific impacts of Welfare Reform an additional staffing budget of £100,000 has been included within the plan for years 1-4.  This budget will be used to fund staff to work with tenants providing them options to prevent them falling into arrears and/or becoming homeless as a direct result of the Welfare Reform.

10.      The provision for doubtful debts has been increased to allow for the negative impact of the Welfare Reform on rent collection.  The Provision has been increased by £165,000 (real terms) which amounts to 1.02% of gross rental income.  This figure was calculated by identifying the decrease in benefits anticipated for all those that will be adversely affected by the accommodations cap, and assuming that 50% of this shortfall could be a risk to the Council in terms of uncollected rent.  The sensitivity analysis explores the scenario of 100% of this shortfall in housing benefits impacting on rent collection.  Taking this into consideration, the business plan is still viable.

11.      The latest projections are attached at Appendix G(i) and G(ii) to the Business Plan .  These show the total amount of prudential borrowing required over years 2 – 7 increasing from £32.4 million to £33.9 million. The date anticipated that all prudential debt can be repaid is now 2032/33 (previously (2031/32). 

12.      Additional amounts have been included in the Housing Improvement Programme as follows:-

13.      An increase in the annual amount for Aids and Adaptations of £171,000 per annum from 2014/2015 onwards, increasing with inflation. This is based on the current high demand for the service.

14.      An additional £500,000 per annum for years 2 to 4 inclusive, for works to Leasehold properties.  Whilst capital and revenue works to Leasehold properties are recoverable from the leaseholder it is thought that a prudent approach would be to include the cost of these works in the Business Plan.  It remains however, critical that a procedure is in place to minimise any recoverable costs.

15.      A summary of the movement in the financial position is included in the table below.

 

December 2012

December 2013

Difference

WHQS Target

2016/17

2016/17

No Change

Prudential Borrowing

£32.4 million

£33.9 million

+£1.5 Million

Peak Debt

£30.1 million

£31.5 million

+£1.4 million

Repayment of Debt

2031/32

2032/33

+ 1 years

Revenue Surplus in year 30

£98.2 million

£103.5 million

+£5.3 million

 

 

Sensitivity Analysis and Risk Analysis

16.      One of the major risks to the Council is the impact of prudential (unsupported) borrowing which is required to ensure WHQS is met by April 2017.  The costs of borrowing must be able to be met from the HRA, and it must be considered that any outstanding unsupported borrowing repayments would fall on the general fund should the housing stock transfer at any point in the future before the debt is repaid.  The implications for this are set out in the business plan.

17.      There are a number of risks associated with the assumptions used in the financial projections for the business plan.  Some of the potential risks have been modelled to assess their impact on the viability of the business case.  The results and relative risk assessments are shown in Appendix H and I to the plan.

18.      The business case is most sensitive to the cessation or reduction of the Major Repairs Allowance.   Sensitivities 6 and 7 explore this risk and whilst the Business Plan is still viable, the level of peak debt could be viewed by the Council as an unacceptable level of risk.  In addition, the HRA Revenue surplus at year 30 is considerably reduced.

19.      Possible changes to the financial regime that the Council operates will be a further risk to the Council. For instance, should changes be introduced to the rules on prudential borrowing, without which the Council could not achieve WHQS by April 2017.

20.      At the time of writing, there was an indication from WG that the 11 remaining Local Housing Authorities will be permitted to exit the HRA Subsidy system in March 2015 subject to certain tasks being completed. However, until further information and guidance is issued from WG the 2013 Plan assumes that the HRA Subsidy system will remain as is.  Further analysis and information will be brought to Cabinet when the information is available.

21.      There are extensive monitoring and regulatory arrangements that govern the Council’s finances.  In reality the council would take steps to avoid severe financial consequences and so the risks are consequently more likely to impact on the level of improvement to properties and level of service to tenants.

22.      Leaseholders will be responsible for a proportion of costs of the improvement works (external works).  There is a need for formal consultation as there are a set number of legal steps that need to be followed in order to ensure the costs of works are recouped by the Council. The process for consultation has commenced and all leaseholders have been issued the required formal notices in accordance with the Service Charges (Consultation Requirements)(Wales) Regulations 2004.

23.      The figures in the Housing Business Plan are based on current projections and if financial conditions should worsen then the level of investment proposed may not be achievable.

 

24.      The total level of required Prudential Borrowing is £33.9m and the peak debt is £31.5m.

25.      The Housing Revenue Account working balance at 1 April 2013 is £13.570m.

Sustainability and Climate Change Implications

26.      The principles of sustainability run through the Housing Business Plan and the delivery of the Welsh Housing Quality Standard. Communities will be strengthened by having access to good quality housing in safe and secure environments.  With regard to WHQs works, key performance indicators are in place to monitor contractors against community impact and environmental impact

Legal Implications (to Include Human Rights Implications)

27.      It is a legal requirement of the Welsh Government that each local authority produces a Business Plan and 30 year financial forecast describing how it will provide the investment to meet the Welsh Housing Quality Standard.

Crime and Disorder Implications

28.      Many of the requirements of the WHQS contribute to the Crime and Disorder agenda, in particular, the requirements of safe and secure dwellings located in safe and attractive environments.

Equal Opportunities Implications (to include Welsh Language issues)

29.      The Housing Improvement Programme improves the Council’s opportunities for assisting disadvantaged members of society.

Corporate/Service Objectives

30.      Meeting the WHQS and the Housing Improvement Programme contributes to the Council’s corporate priority that Vale of Glamorgan residents have access to affordable, good quality suitable housing and housing advice and support.

Policy Framework and Budget

31.      This report is a matter for Executive decision.

Consultation (including Ward Member Consultation)

32.      The Leader and Cabinet Member for Housing, Building Maintenance and Community Safety have been consulted.

Relevant Scrutiny Committee

33.      Corporate Resources.

Background Papers

Vale of Glamorgan Business Plan (December 2013)

 

Contact Officer

Lori Bigglestone - Accountant

 

Officers Consulted

Hayley Selway – Head of Housing and Building Services

Sian Davies – Managing Director

Simon Davies – Operational Manager (Assets)

Martyn Lewis – Group Quantity Surveyor

Mike Ingram – Operational Manager Public Housing Services

 

Responsible Officer:

Miles Punter - Director of Visible Services and Housing

 

 

 

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